Soto-Rios v. Banco Popular De Puerto Rico
662 F.3d 112
| 1st Cir. | 2011Background
- Debtors Soto-Rios and Tosado-Arbelo filed Chapter 11 bankruptcy after executing three mortgage deeds to Banco Popular de Puerto Rico.
- Two deeds were presented for recording in October 2004 and the third in 2005, but recording backlog left them pending at the petition date.
- Banco Popular filed a secured proof of claim and the debtors asserted avoidance actions under automatic stay, strong arm power, and preferential transfer provisions.
- The bankruptcy court denied relief, ruling that exceptions to the stay and strong arm power applied and that the transfers were not preferential.
- The district court affirmed, and the debtors appealed to the First Circuit challenging the pre-petition interest and the preferential transfer rulings.
- The First Circuit affirmed, holding Banco Popular had a pre-petition interest in property and that no preferential transfer occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Banco Popular had a pre-petition interest in property under 362(b)(3) and 546(b)(1)(A). | Soto-Rios contends no pre-petition property interest existed because recording was essential to validity under Puerto Rico law. | Banco Popular asserts presentment and timely filing for recording created a pre-petition interest superior to later purchasers. | Yes; Banco Popular had a pre-petition interest in property. |
| Whether presentment and the relation-back doctrine in Puerto Rico can create an interest superior to later purchasers for purposes of 547(e)(1)(A). | Debtors argue relation back cannot fix perfection within 547(e)(1)(A) window. | Banco Popular relied on relation back to establish an earlier perfection date. | No error; relation back can affect perfection timing under 547(e)(1)(A) here. |
| Whether the transfers of mortgage deeds to Banco Popular were preferential under 547(b). | Debtors contend transfers were within 90-day window due to unperfected deeds. | Banco Popular perfected before the 90-day window; transfers were not preferential. | No; transfers were not preferential. |
| What is the governing standard of review for summary judgment in bankruptcy matters. | Not at issue; standard applied. | De novo review of bankruptcy court decision. | De novo review applied. |
Key Cases Cited
- In re 229 Main St. Ltd. P'ship, 262 F.3d 1 (1st Cir. 2001) (pre-petition interest may arise from presentment and pursuit of lien rights under state law)
- The Ground Round, Inc., 482 F.3d 15 (1st Cir. 2007) (federal law governs interpretation of 'interest in property' under bankruptcy)
- Fidelity Fin. Serv., Inc. v. Fink, 522 U.S. 211 (Supreme Court 1998) (state-law perfection cannot defeat federal timing requirements under 547(c)(3))
- In re Computer Eng'g Assoc., 337 F.3d 38 (1st Cir. 2003) (state-law perfection governs when perfection occurs for 547(e)(2) analysis)
- In re Ryan, 851 F.2d 502 (1st Cir. 1988) (trustee status with hypothetical lien holder; 544(a) framework)